Harry Dent’s New Forecast

By on August 17, 2008

In a recent article from Canadian Business Online, Harry Dent explains why his forecast for the Dow’s high was way off. Basically, Dent says that he underestimated the strength of the bull market in commodities and the negative geopolitical environment.

Dent’s overall outlook for the future goes like this: The U.S. economy will be in recession between June and October. That will take the pressure off commodities, which will fall throughout the second-half of 2008. Later this year into early next, a rally in stocks will follow. But then? That’s it. “Between mid- to late 2009 and late 2010, runaway commodity markets collide with the broad peaking of the baby-boom spending wave, and that’s going to create a crash,” says Dent. “The boomers will be spending until late 2009. After that, the extra support the boomers delivered is going to progressively fall out of the economy, and that’s going to be the final nail in the coffin on the postwar expansion of U.S. debt.”

U.S. stock markets will sag for a decade. Investors will have to be nimble to preserve their wealth. Between mid-2010 and mid-2011, Dent suggests locking up money in high-yielding, long-term bonds and leaving it there for the decade — the years between 2010 and 2020 will be a rare period in which bonds will outperform stocks. Dent’s advice is to be ready to go all-cash when the crash comes and “then sit for a year and wait for the smoke to clear.” “By 2012, the crash will be over and serious deflation will take hold as the housing, oil and stock market bubbles deflate — that’s going to drive up the value of bonds,” he adds. “For two out of four seasons of the larger cycle, stocks do well. But this is going to be one season they don’t.”
Dent also recommends picking up Asian and health-care stocks in late 2010. The decade of economic reorganization will lay the groundwork for the emergence of China and India as major economic players in the early 2020s, so it will be smart to get in early on the empires of the future. “Let the crash hit, and then buy China, India and health care,” says Dent. “International and emerging-market stocks will do better than U.S. stocks in this period, and everything is going to be on sale.”

Source:

http://www.canadianbusiness.com/markets/stocks/article.jsp?content=20080818_198704_198704&page=1

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4 Comments

  1. Jay

    October 21, 2008 at 11:45 pm

    Harry Dent is usually right, long term. Scary, but right.

    I plan to sell, but am hoping for the predicted rally first!

  2. stocksystm

    October 22, 2008 at 4:02 am

    Like you say, Dent seems to have a good handle on the long trend. However, his price forecasts for the Dow have been way off. There are simply too many variables.

    For example, I believe the Chinese economy may crash between now and 2011, but after that their growth might power the world economies. Chinese growth could overshadow our retiring baby boomers, making the U. S. stock market perform better than Dent expects.

  3. TOC

    November 21, 2008 at 5:31 am

    Dent is ‘usually right’?…’good handle on the long trend?’ I read his book and attended several of his speaking engagements. For almost a decade, Dent criss crossed the U.S. spouting his “DOW 30000″ prediction. He was off by more than a mile. NOT ‘right’ and NOT a good handle on the long trend. He was as wrong about DOW 30000 as Prechter was wrong all through the late 90’s about a stock market crash. We finally got a stock market crash, 10 years later. A broken clock is right twice a day. You can go broke listening to these guys, but at some point they will be right, and then say “See, I told you so”. But meanwhile, many people have gone broke trying to follow their advice.

  4. stocksystm

    November 22, 2008 at 1:39 pm

    TOC you learned, probably with a heavy investment in “tuition”, that no can accurately predict where the market will be in the future.

    A couple of months ago Harry Dent said if the bailout was passed the Dow would climb to 13,000 from its level then of around 11,000. Instead it plunged to 8,000. Just another example.

    I’ve posted a lot of predictions on this blog and from what I’ve seen less than half of them are right.

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